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Renewable Energy. Why do we need renewable energy. Climate Change 90% of primary energy supply from fossil energy resources coal 75% of fossil energy supply. SA one of the highest CO2/capita emitters in the world Emission constraints could have a significant impact on SA Trade and Economy
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Why do we need renewable energy • Climate Change • 90% of primary energy supply from fossil energy resources • coal 75% of fossil energy supply. • SA one of the highest CO2/capita emitters in the world • Emission constraints could have a significant impact on SA Trade and Economy • Electricity generation capacity • Capacity run out by 2005 – 2007, unless demand side or new power plant(s) is built. • Fuelwood • Unsustainable harvest of fuelwood, 9% SA’s energy mix from fuelwood, mostly harvested in unsustainable manner – Environmental and Energy security risk for rural poor
Vision: Renewable EnergyAn energy economy in which modern renewable energy increases its share of energy consumed and provides affordable access to energy throughout South Africa. Thus contributing to sustainable development and environmental conservation.
Goals: Renewable Energy1) Social sustainabilityBEE and job creationImprove the health of the nationEnergisation of rural areasPoverty alleviation2) Environmental sustainabilityReduce GHG emissionsReduce environmental pollution3) Economic sustainabilityImprove energy securityBuild new electricity generating capacity
Policies and legislations • White Paper on Energy policy December 1998 • Increasing access to affordable energy sources • Improving energy governance • Stimulating economic development • Managing energy related environmental and health impacts • Securing supply through diversity • Purpose: Encourage the development of renewable and environmentally sound electricity generation technologies • To encourage more players to enter the generation industry in order to develop a competitive power market • Stimulate the development of new and renewable sources of energy
Policies and legislations cont… • White paper on Renewable Energy November 2003. Aim: To create a conditions for the development and commercial implementation of renewable technologies • Target: 10 000 GWh (0.8 Mtoe) renewable energy contribution to final energy consumption by 2013, to be produced mainly from biomass, wind, solar & small-scale hydro. • The renewable energy is to be utilised for power generation and non-electric technologies such as solar water heating and biofuels. This is approximately 4% (1667 MW) of the estimated installed electricity demand (41 539 MW) by 2013. This is equivalent to replacing two (2x 660 MW) units of Eskom's combined coal fired power stations OR 1100 million litres of diesel (14% of 1 year) replaced with biodiesel
Review of the target • The review of the renewable energy target will be done every five years • Aim is to check the progress in achieving target and to address areas where additional input(s) may be required. • Targets are both challenging and achievable.
RE Technology Potential GWh Contribution Percentage Biomass pulp and paper 110 0.1% Sugar bagasse 5,848 6.9 Landfill Gas 598 0.7% Hydro 9, 245 10.3% Solar Water Heating: commercial 2,026 2.0% Solar water heating: residential 4,914 6% Wind 64,102 74% TOTAL 86,843 About 43 % of 2003 electricity consumption 100% Macro-economic Analysis: Results Macro-economic Analysis: Technical feasible renewable energy contribution (excl biofuels, solar thermal power generation and wave energy)
Policies and legislations cont…Macro-economic Analysis: 10 000 GWh least cost renewable energy contribution (excl biofuels, solar thermal power generation, wave energy etc.)
Monitoring and evaluation of targetIn the period November 2003 to January 2005, 70 GWh of new additional renewable energy contributions reported (mainly solar water heating)A further 22 GWh renewable energy was introduced in the period January 2005 to December 2005 for an accumulative renewable contribution of 92 GWh by December 2005.Further, in the period January 2006 to June 2006, 25 GWh was reported to be produced from renewable energy mainly solar off-grid and biofuel, however the data collection process will carry on for July to December 2006 in order to get the final value for the calendar year 2006
Renewable Energy Finance and Subsidy Office (REFSO)The scheme started with a once-off capital grants (total R14.2 million) for over a period of three years (2005/6 – 2007/8) that are made available for renewable energy projectsThe scheme is administered by the DME Renewable Energy Finance and Subsidy Office (REFSO) which came into operation in October 2005To date there are 25 projects that are registered, 9 on electricity, with a capacity of 29 MW, and 16 on biodiesel with a capacity of 474 260 Kilolitres per annum.The total subsidy required to fund the current registered projects is estimated at R137 million (R7.5 million for electricity and R129.5 million for biodieselA subsidy contract for an electricity generation project to the value of R975,000-00 has been approved by the Director-General. The subsidy will only be disbursed when the project development reaches certain milestones, with the first payment due before end of March 2007 and the last one in December 2007.
Biofuel Industry StrategyThe draft biofuels industry strategy was approved by cabinet in December 2006.The strategy is currently out for public comments. The Department has just finished a country-wide public consultation process which took place in a form of workshops in all nine Provinces. The strategy will be tabled in Cabinet before end of May 2007.
Long term sustainable financing scheme for grid based renewable energy projectsClean Development Mechanism (CDM) and Tradable Renewable Energy Certification System (TRECS) are generally acceptable to service the debts.However the above mentioned two financial mechanisms are not adequate for risk mitigation for the investors, banks and financierslong term sustainable financing scheme for grid based renewable energy projects which lowers the loan repayment risk and honour long term power purchase agreements and attract new and sustainable renewable energy investment.A feasibility study on the development and management of a top-up feed-in tariff scheme is to be undertaken through a consultative process
Tradable Renewable Energy Certification System (TRECS)This is yet another revenue stream that is developed to assist small scale renewable energy power producers to cover the construction and maintenance costs and other debts.A major advantage of TREC is that it can be traded worldwide and separately from the electricity grid infrastructure (no use of grid system charges or grid access problems).Consultant was appointed in March 2006 to undertake a feasibility study in order to provide Government (DME) with precise and specific detail recommendations on the establishment of voluntary and sustainable TREC system for South Africa and to develop and present a detailed, practical and sustainable voluntary TREC implementation plan.Further consultation with stakeholders will be undertaken to find out how could the stakeholders be engaged in the TREC system implementation, how would they contribute to the establishment of voluntary TREC in South Africa. Implementation of TREC system will then follow after further consultation with stakeholders.
South Africa Wind Energy Programme (SAWEP)South African Wind Energy Programme (SAWEP).Model PPA, PWA, financial model, “green” marketing, financial analysis 45 MW.The GEF in November 2004 approved in principle SAWEP Full Size project grant of U$7 million aimed at the development of a wind industry in South Africa.The Darling Wind farm investment was accepted as South Africa’s co-funding (commissioning of Darling Wind farm is a prerequisite for GEF SAWEP grant).Awaiting project doc, DME Executing authority with UNDP assistance, Project Steering committee, Advisory committee, project director to be appointed, inception workshop to be held
Financial mechanismsREFSO (capacity based subsidy)Top up feed in tariff (production based subsidy)REMT (technical assistance)TRECs (“green” premium)CDMCEF (equity) DBSA, IDC, Commercial banks (debt)
Barriers to the renewable energy implementation1) Financial assistance2) Regulatory and legal framework3) Lack of consumer awareness on the benefit and opportunities of renewable energy4) Lack of community involvement5) Assess community needs6) Lack of visible Renewable Energy Project7) Lack of sustainable RE energy development( perpetual research)
Disbursement of REFSO's funds Requirements and conditions for REFSO’s funding such as EIA, water permits, biofuels licenses Time taken to obtain all necessary requirements and money involved for other grid projects. Off-take agreements (eg PPA) take up a lot of time in the subsidy application process Collaboration and co-ordination with other Departments and municipalities regarding grid based projects. ` Challenges
Opportunities Job creation Economic Development Business Opportunities, for new entrants (SMMEs, BEEs etc) Energy security( diversity of energy supply) Environmental benefits Hybrid mini-grid `
Conclusion • Need to develop lead RE projects that are visible • Need to explore a combination of innovative (e.g. TRECS) and regulated long term financing schemes. • Ongoing consultations with National Treasury and NERSA. • DME Renewable section is supporting the development of the Electricity Regulation Act (Section 46 of 2006) regarding New generation capacity. Inputs on Energy Bill. • Ongoing Non-grid R&D (e.g. hybrid mini-grid systems for activation of rural economies) through SANERI, HOMERGIS etc.
